RIALTO – An increase in the retirement benefits for police and firefighters that is set to begin next year will almost triple the city’s unfunded pension liability, according to a cost analysis by the California Public Employees Retirement System.

The “3 at 50” plan which allows policemen and firefighters with 30 years of service to retire as early as age 50 and collect up to 90 percent of their highest annual salary will boost the unfunded liability from $9.7 million to $26.8 million when it goes into effect in 2011, according to CalPers.

The unfunded liability is the amount of unbudgeted benefits for current and future retired policemen and firefighters in the city.

Officials were surprised when they got the news Wednesday.

“That’s staggering,” Councilman Ed Palmer said.

Palmer was not on the City Council in 2008 that voted 3-2 to sweeten pensions.

Council members Ed Scott and Joe Baca Jr. joined Mayor Grace Vargas in approving the plan. Councilwoman Deborah Robertson and former Councilwoman Winnie Hanson voted against it.

Scott said he was concerned about the report, but hadn’t taken a look at the numbers yet.

“I would say we are probably going to look at (using) reserves the next couple of years,” Scott said.

The city has about $31 million in economic reserves. The budget stands at about $52 million.

The city’s deficit is more than $8 million, according to City Manager Henry Garcia.

Robertson said two years ago she saw this scenario unfolding.

“And that was the whole reason why I voted against it to begin with,” Robertson said. “We did not have any indication that we had new revenue streams to be able to afford it and we are still currently in that position. Your reserve is not considered new revenue.”

Officials said the city would need to find creative ways to get revenue in order to fund the pensions which, combined with a bump to general employees’ pensions next year, will cost the city about $5 million a year.

Garcia said one solution is consolidating city departments. He said he may unveil the plan toward the end of this year or early 2011.

The plan would call for Garcia to oversee at least two departments if top directors retire.

The city might also look at forming joint powers authorities with other cities to provide services.

“Somewhere in the near future a variety of us along the I-10 corridor (will consider) what services can we regionalize together to create a greater scale of economic efficiencies and services,” Garcia said.

The city also is looking at leasing its water department.

But tinkering with departments could mean job losses.

“I think all the council members are concerned about layoffs,” Palmer said. “We’ll use some reserve money and hopefully the employees step up to the plate like they did last year and give a little to save their jobs.”

The city’s employees gave up about $4 million in concessions to close last year’s budget gap.

The city has approached the Rialto Police Benefit Association about giving up more.

But officers have already paid their fair share to fund the benefit by giving up holidays and pay increases last year, said Sgt. Richard Royce, head of the association.

“I don’t think the city is quite hurting as bad as they say,” Royce said.

Garcia said layoffs may be avoided if the consolidations and retirements could “bridge that gap in the budget.”

The city’s employer rate – the amount of payroll that will go to pay for the increased benefit – jumps from 19.3 percent to 33.7 percent starting July 1.

A CalPers spokesman said the rate fluctuates depending on the return on CalPers’ investments, which took a 20 percent hit last year to about $200 billion in investments.

“It’s dangerous and misleading to look at a short term situation and assume the situation won’t change or the rates that we established over the last couple of years will continue into the future,” Edd Fong said.

Still, one California League of Cities official said city managers across the state are concerned about their ability to continue paying into CalPers.

“By law (CalPers) will get the money they need to make the system financially solid,” said Dwight Stenbakken, deputy executive director for the league. “The question is, can the employers to pay into it. That’s where the sustainability question comes in.”

Stenbakken said it’s difficult for city managers to find immediate savings because cities can’t change existing benefits for those who are retired.

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